Earlier this year, a group of investors worth more than $6.5 trillion distributed an open letter to McDonald's, Chipotle, and other giants of quick-serve dining. They chided the restaurants, all active participants in the agricultural supply chain, for failing to address their outsize contribution to climate change. Unlike other "high-emitting industries," they asserted, the agricultural sector has neglected to establish a clear plan for addressing and eliminating pollution.Citing staggering water pollution and land use statistics, the investors issues a series of demands. They insist the organizations develop clear, transparent plans for reducing their greenhouse gas emissions as well as that of their supply base. Most importantly, they call on the fast food providers to share their progress with investors and consumers.Their deadline for these changes? March. As if on cue, another high-powered group of investors is calling for changes to the world of agriculture. This time around, the letter's recipients are unknown. Its distributors, however, are revealed to include "57 investors representing approximately US $6.3 trillion in assets." Ceres, a sustainability non-profit, is spearheading both initiatives.

Soy and Deforestation

The Union of Concerned Scientists (UCS) reports that deforestation and the accompanying fires generate 10% of all global warming emissions. Soy is one of just four commodities (along with beef, palm oil, and wood) that drives the majority of this destruction and pollution.Though the Brazilian Amazon has long stood as a "poster child for the global forest-conservation movement, and has enjoyed increasing protections," Bolivia's stretch of the world's largest rainforest is decidedly less secure. UCS estimates nearly 500,000 hectares of forest fall prey to soy farming every year.In 2017, The New York Times reported that the country has lost a Rhode Island-sized stretch of forest every year since 2011. Accompanied by satellite imagery, the exposé found that much of this "large-scale forest-clearing" was carried out by farmers who trade soybeans with companies including Cargill. At the time, Cargill's CEO David MacLennan expressed a desire to take action. "If there's something there, if it's substantiated, we'll do something about it." Cargill announced last month that it is committed to sustainable soy and pledged to eliminate deforestation by 2020.The type of satellite tracking employed by the Times has grown increasingly familiar to environmentalists and destructive corporations alike. Providing real-time insights into deforestation, it likely inspired this week's news.

Investors Demand Action

Based on current trends, global demand for soybeans is expected to increase by between 70 and 80 million metric tons over the next decade. This suggests the deforestation epidemic will grow far worse if the soy trade's major players don't act now.

The letter from investors acknowledges that soy represents an essential cash crop for farmers across a number of developing countries. They express concern, however, "that the environmental and social issues associated with unsustainable soybean production could have a material impact on companies that source the commodity."

They go on to enumerate the risks associated with continuing to source soy traditional methods. In addition to damaging the environment, the soy chain's key stakeholders risk damage to their reputation as consumers begin to associate them with deforestation as well as "land and labour rights issues." These companies could also soon play a role in diminished agricultural yields and even face backlash from regulatory perspective as the situation worsens.

Julie Nash, Ceres' Director of Food and Capital Markers, suggests recent findings on the scope and severity of climate change has inspired the investors to action.

"In light of the latest IPCC report urging the limiting of global temperatures to 1.5 degrees," she remarks, "addressing the emissions impacts from deforestation will be critical."

A (Non-Negotiable) Call to Action

Like January's investor letter, this week's culminates in a list of demands. The investors write, "We expect companies to demonstrate commitment to eliminating deforestation within their entire soybean supply chain, and will seek evidence of this on multiple levels."

While they do not include a timeline - or identify any potential consequences - they break their expectations into four sections:

1. Awareness and Governance

- Gain insights into sustainability and deforestation at the board level.

- Develop and disclose a commodity-specific, time-bound plan for addressing the issues across their entire supply chain.

2. Risk Management and Traceability

- Disclose processes for identifying and addressing risk factors.

- Commit to traceability across all direct and indirect supply networks.

- Provide evidence of a transparent system for monitoring supplier compliance.

What's Next?

With numerous investor groups demanding quick and comprehensive action, it's clear the agricultural sector can no longer afford to lag behind its high-emitting peers. Coffee, cocoa, palm oil, beef, and tea providers all face a new level of scrutiny. Which commodity group will find itself in the spotlight next?

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